Chapter VIII of the MCS Act and Chapter VII of the MCS Rules deal with Audit, Inquiry, Inspection and Supervision.

1) Appointment and Fees

Sec.81(1)(a) – Certain societies to be audited by the Registrar’s auditors.

Sec.81(1)(b) – Other societies to get accounts audited from panel of auditors maintained by the Registrar or by a C.A. holding certificate in co-operative audit issued by ICAI.

Rule 69(1) – Audit to be conducted by Departmental Auditors or by Certified Auditors which includes Chartered Accountants, certain diploma holders and ex-staff of co-op. department.

Under Sec. 72(1) of the Multi State Co-op. Societies Act, only Chartered Accountants can be appointed as Auditors.

Appointment is done by the Registrar or on behalf of the Registrar and report has to be submitted to the Registrar.

Rule 74 – The scale of fees which are fixed by the Registrar (Order No. CC/ADT/Scale of Fees of 92 dt. 15th May, 1992). The scale of fees which are fixed by the Registrar are calculated based on working capital, which is defined as “funds at the disposal of the society including its paid up share capital”. It is different from the normal concept of working capital.

Sec. 81 and Rule 69 outline rights and duties of Auditor and report to be submitted by him.

Sec. 81(5) – Auditor has right to receive notice of and attend Annual General Meeting.

Rule 69(2) – Audit to be conducted for all the previous completed years for which the audit has not been done (provided no Auditor appointed or Auditor has resigned).

Sec. 81(5B) & Rule 69(3) – Besides audit report, Auditor to submit Audit Memorandum in the prescribed format. Form 1 is a general format for all types of audit. In addition, separate formats prescribed for each type of society (Form __ for Credit Society, Form 27 for housing society, etc.)

Rule 69(7) – Summary of Audit Memorandum prepared by the Auditors required to be read in general meeting.

Rule 61 – Annual statement of accounts to be prepared within 45 days of the close of the co-op. year.

Rule 62 – The Balance Sheet and Profit & Loss Account has to be prepared in Form ‘N’ by all the societies.

General

During 1st audit, the Registration Certificate with the common seal has to be verified.

Sec.45 – Restriction on transactions of a society with non-members.

All appropriations are entered into the books of accounts after it is approved by AGM Sec.65.

Sec.67 – A maximum dividend of 15% can be given (Additional dividend with Registrar’s approval). Under the Multi-State Act, dividend is to be paid as specified in the Byelaws [Rule 24(2)].

Rule 107-B – Security to be furnished by officers and employees handling cash.

Sec. 110 – On liquidation, the balance may be divided amongst members or utilised for objects of the society.

Balance Sheet

The Balance Sheet formats of a co-operative institution and commercial banks are quite different.

In a co-op. institution, loan, other assets etc. are all shown at gross figures and the overdues, NPA provisions, provision for other doubtful assets are reflected on the credit side.

Liabilities

(i) Membership, Share Capital & Voting :

· Under this head, “individuals’ means share capital of all excluding co-operative institutions and State Government. Under Sec.22, a firm, a public trust, a local authority, a society or any body corporate can become member. Sec.25 of Multi-State Act permits any person competent to contract to become a member.

· Sec.28 – Besides verifying the books stated hereinbefore, Auditor has to ensure that no member holds shares exceeding 1/5 of the share capital of the Society or Rs.20,000/- whichever is less. Under Sec. 33 of the Multistate Act, it is as per the limit provided in the Byelaws, subject to a ceiling of 1/5 of the share capital.

· Rule 20 – Shares can be issued in joint names. Minors and persons of unsound mind, inheriting the share of a deceased member, can also be admitted as member through their legal representatives or guardians.

· Sec.29(2)(a) – A member cannot transfer his shares until he has held it for one year.

· Sec.30, Rule 25 – Nomination is permitted, including nomination of a minor or a person of unsound mind.

· Sec.29 – Society allowed to buy back its shares from its members on their resignation etc., upto a maximum of 10% of the paid-up share capital every year.

· Rule 23 – Amount to be paid back is based on the valuation of his share, which in no case can exceed the amount paid for the purchase of those shares.

· Sec.27 – There is a principle of “One Man One Vote”.

· Sec.27 – During meetings, no proxies are allowed except the ones that are specifically allowed by the Registrar.

· Rule 21 – A member can resign by giving 3 month’s notice.

· Sec.35, Rule 28 – A member can be expelled from society by a resolution passed by not less than ¾ of members, which may also involve forfeiture of his shares.

(ii) Reserve Fund & Other Reserves :

(a) Statutory Reserves :

Sec.66 – Atleast 1/4 of the net profits to be transferred to Reserve Fund. Registrar has power to reduce it upto 1/10 only. As per this section, subject to the rules and byelaws, the Fund can be used in the business of the society.

Rule 54 – Reserve Fund in excess of the paid up share capital only can be used in the business with the permission of the Registrar.·

Reserve Fund has to be invested in modes specified in Sec.70 read with Rule 54.

Rule 54(2) – These funds which are invested, cannot be drawn upon, pledged or used except with the prior written permission of the Registrar.

(b) Dividend Equalisation Fund :

Rule 52(3) – A society may create Dividend Equalisation Fund and credit to it a maximum of 2% of the paid up share capital in any year until the fund amounts to 9% of paid up share capital. The society may draw upon the fund in any year only when it is unable to maintain a uniform rate of dividend it has been paying during the last preceding 5 years or more.

(c) Bad & Doubtful Debt Reserve :

Rule 49 – Bad debts have first to be written off against this fund before being written off against Reserve Fund and Share Capital.

(d) Investment Fluctuation Fund (Investment Depreciation Reserve):

Rule 55(3) – Investment Fluctuation Fund to be created to cover anticipated loss that may arise on disposal of investments held by the society, if not less than 10% of the working capital is invested in securities. This amount is a charge on Profit & Loss Account as per Rule 51(ii).

(e) Bonus Equalisation Fund

Rule 52(1) – A fund created for payment of bonus to persons other than its paid employees, who are not its members.

(f) Education Fund of State Federal Society:

Sec.68 – A fund created out of annual contributions given by societies to State Federal Society at the rates specified in Rule 53. For Maharashtra, the federal society is Maharashtra Rajya Sahakari Sangh Ltd., Pune, which utilises this amount for education and training in co-operation. This amount is payable irrespective of whether the society earns a profit or not and whether a society has declared a dividend or not. The amount has to be paid within 3 months after the close of co-operative year.

(g) Sinking Fund / Guarantee Fund

Rule 51(I) – A fund created to ensure due fulfilment of guarantee given by Government in respect of loans raised by the society.

(h) Share Capital Redemption Fund

Rule 51(iii) – A fund created for redemption of share capital contributed by government or a federal society.

(i) Additional Funds (Optional)

Special Reserve Fund, Building Fund, Members Welfare Fund, Staff Welfare Fund, Charity Fund etc. – For all these funds, rules have to be framed for its formation, additions and use.

(iii) Deposits and Other Accounts :

· Under this head, deposits from “Individuals” means all deposits excluding those from central co-operative banks and other societies.

(iv) Borrowings :

· Sec.43 – In case of a society, which has taken any financial assistance from the Government in the form of share capital, loan or guarantee, the amount such society can receive as deposits and loans from its members and other persons is subject to restrictions laid down in Rule 35 and in its byelaws. There are also restrictions on the society for acceptance of deposits from trust, local bodies etc.

· Rule 35 – A society without the previous sanction of the Registrar cannot incur liability exceeding in total ten times the total amount of its paid up share capital, accumulated reserve fund and building fund minus accumulated losses. Any excess liability incurred is to be deposited with Central Banks and not used in business of society.

· Rule 46A – Restrictions on borrowings from non-members.

Assets

(i) Cash

· Rule 107C – Maximum cash holding limits prescribed for certain societies. Excess cash has to be deposited in an approved bank within 3 days. No limits prescribed for Co-op. Credit Societies, but for housing societies, it is Rs.300/-.

(ii) Balance with Other Banks :

· Permission required to open bank accounts with other scheduled banks.

(iii) Investments :

· Investment of funds to be done only in modes specified in Sec.70 of the MCS Act, read with Rule 55.

(iv) Advances :

· Sec.44 – Credit Society cannot give loans to or accept guarantees of persons other than its members. However, it can lend to non-members against their deposits.

· Rule 41 – Only specified portion of working capital can be used for lending.

· Rule 42 – Various regulations in respect of loans granted by society

· Rule 43 – A member applying for loan has to hold requisite number of shares.

· Rule 45 – Restrictions on members to borrow from more than one credit society.

· Rule 45A – Loan against pledge of FDR not to exceed 90% of the deposit amount and period of loan not to exceed beyond maturity date of the deposit. If the borrower does not repay the loan, principal and interest due can be adjusted against the deposit.

· Loans were allowed to be given to directors, committee members and their relatives. However, w.e.f. 1st October, 2003, fresh advances to these persons prohibited by RBI, while old advances to be recovered when due and not to be renewed (Circulars dt. Apr. 29, 2003 and June 24, 2003). Further, they are not allowed to stand as surety / guarantors (UBD.PCB.Cir.10/13.05.00/04-05 dt. Aug. 7, 2004). This however does not apply to employee related loans given (RBI/2005-06/175 – UBD.PCB.Cir.No.14/13.05.000/05-06 dt. Oct. 6, 2005)

· The law of limitation does not apply to the loan documents executed by a borrower, as long as he continues to be a member of the co-operative sector.

(v) Fixed Assets :

No specific provision for depreciation and its rates under the Act. However, Sec.65(1), read with Rule 49A under point (vi) states that for calculating net profit, depreciation has to be deducted from gross profit.

· Norms prescribed by department of co-operation for Income Recognition and Asset Classification i.e. Non-Performing Assets (NPA) – Applicable from 31st March, 2005 – Circular dt. 10th November, 2004 – subsequently made applicable from 31st March, 2006 and modified from time to time. The present norms are as follows:

· Income Recognition for F.Y. 2007-08 & 2008-09

§ For F.Ys. 2007-08 & 2008-09, Account considered as NPA, if interest due for 3 quarters (9 months) is not actually received (proposed to be reduced to 2 quarters [6 months] for F.Y. 2009-10 and 1 quarter [3 months] from F.Y. 2010-11 onwards)

§ Reversal of accrued interest on account becoming NPA.

§ Thereafter, all interest to be accounted on receipt basis and not accrual basis.

§ Above norms are minimum prescribed. Additional provision can be made on case by case basis.

§ In consortium advance, record of recovery at Society being audited only to be considered.

§ Accounts regularised with a few credits around the Balance Sheet date need to be carefully looked into (source of the credit, genuine entries, additional facilities granted in some other account etc.)

§ For all accounts classified as ‘Doubtful’, it is very essential to determine the existence and the present value of the primary and collateral securities through valuation – property valuation (once in 2 years), inspection (periodical), monthly stock statements for stocks hypothecated and depreciation @ 10-15% on plant and machinery.

§ Suit filed accounts to be classified as doubtful, unless there is a strong justification to show it is Sub-standard.

§ Make specific note and report of accounts which appear to be sticky but are not yet classified as sub-standard / doubtful.

· Upgradation of Accounts

§ Reschedulement of recovery cannot give the advance a better classification than the previous one

§ NPA accounts can be upgraded to Performing Accounts,provided all overdues adjusted

§ Upgradation within the NPA category not permitted (Eg. a Doubtful account cannot be made Sub-standard even if the overdues are reduced to less than 24 months)

Write-Off of Bad Debts

· Rule 49 – Any asset that has to be written off – 4 stages for write-off.

i) Recommended by Board.

ii) Certified by Auditor.

iii) Sanction by general body

iv) Approval by Registrar.

However, in case of societies classified as A or B at the time of last audit, Registrar’s approval is not required, if the bad debts are written off against Bad Debt fund.

Profit & Loss Account

· Sec.65 – Net Profits to be determined after deducting exps. as provided in Rule 49-A.

· As per Accounting Standards, mercantile system of accounting to be followed, but Act is silent on this aspect. However reading Rule 49A regarding depreciation, various provisions for income tax, bad and doubtful debts, investment fluctuation, retirement benefits etc., Form ‘N’ of MCS Rules and Form ‘A’ & ‘B’ of B.R. Act, it implies that accounts have to be maintained on mercantile basis.

· Sec.65 – In Profit & Loss Account, provision for Dividend Equalisation Fund and Share Capital Redemption Fund are to be made. These are considered as charges on Profit & Loss Account (Under the normal accounting principles, these would be appropriations from Profit & Loss Account).

· Sec.71A – Funds not to be utilised for certain proceedings filed or taken by or against officer in personal capacity.

· Sec.68 – Compulsory provision for payment of Education Fund to State Federal Society to be made, which is a charge on Profit & Loss Account and has to be paid within 3 months after the close of the co-operative year (Rates given in Rule 53).

5) Rectification

Sec.82, Rule 73 – Within 3 months from the date of the statutory audit report, the society has to submit a Rectification Report in Form ‘O’.

Dear Sir,
I had passed GDCA exam but still i m not applied for GDCA Panel. Now i want to take GDCA Panel but i dont know the procedure of it. also i want the more details about the GDCA like How many days are required to get the panel. After panel how to get the Co-operative societies Audit. and ect. Sir please provide me the information about GDCA Panel. Wating for your favourable reply. Thanking you – my mob -9987253353 my e-mail- bharat.patil@timesgroup.com

I have done M.com and also completed G.D.C.& A. Please forward me the information regarding registration and what document required. Where shall I have to go for registration. – mob 9987253353 my e-mail-bharat.patil@timesgroup.com

respected sir , I had pass GDC&A exam plz tell me the procedure for registration on pannel as a auditor. when & where i will get that forms of panel.their other procedure & details.waiting for your positive response 7387109038 Email

I have worked in cooperative banking sector(also worked in cooperative credit societies and also as a audit assistant for co operative hsg society)for 12 years.i have passed GDCA exam in 2003 i got a GDCA certificate and marksheet only, once i had exquiry in the konkan bhavan office about this audit panel procedure, but they told me that every year a advertisement published by govt.in particular newspaper and we have to response to that ad and follows the procedure but they didnt mention about the newspaper ,date or period for this.so how can i get to know the procedure about this audit panel? pls tell me about this. thanks.if someone wants to contact me my mobile-9167552729

respected sir , I had pass GDC&A exam plz tell me the procedure for registration on pannel as a auditor. when & where i will get that forms of panel.their other procedure & details.waiting for your positive response.7385426392

Dear Sir,
I had passed GDCA exam in 2006. but still i m not applied for GDCA Panel. Now i want to take GDCA Panel but i dont know the procedure of it. also i want the more details about the GDCA like How many days are required to get the panel. After panel how to get the Co-operative societies Audit. and ect. Sir please provide me the information about GDCA Panel. Wating for your favourable reply. Thanking you

I passed GDCA Exam in the month of Oct 2010, I want to enroll myself on panel.please tell me registration formalist , some officers say that after b.com 3 year we can received panel number? or After M Com 1 years its truth

Resp Sir,
Please tell us the detailed procedure of registering the Multi state co-operative society and if possible also provide the specimens all the application forms required in the process..??
waiting for your reply…!!

hi i have passed post graduation from mumbai university last year now i want to appear for gdc&a exam which will be conducted at this year,. please tell me the procedure for applying to the exam and further importance of this course. thanking you
yours sincerely. please email me as senguntharsumi@gmail.com

I had Completed GDC&A Exam In May-2004 , i want to register my name on panel of GDC&A So,please send me the detail procedure to register the name on panel as early as possible before due date current qualifiction Mcom,gdca,Executive CS.

i had completed Audit of Co.op. bank in maharashtra. after that Bank has submitted Rectification Report in Form “o” U/s 82/87 of the Act. Now I have to Verify the said correction and i have to submit report to bank and other authority – is there any specific format for that. can u guide me in the said matter.

Am Mr.sunil gadhave has Passed the GDC&A Exam In May-2007 With 7 years Of experience in co-operative society after passing the exam & i want register my name on panel of GDC&A So,please send me the detail procedure to register the name on panel as early as possible before due date My Current Qulification is B.Com.GDC&A

i am salman from thane dist i have completed t.y.b.com last two year and my percentage is below 50% it is possible to i have take a admission in GDC&A Course and practice under the CA(Chartered Accountant)my cell no 9773047452 please reply me urgent

I am working in the HUL Con you suggution to me the my society just form , so i watn information about the rules & Regulation so , can you suggust me which book available in the market about the co-society all information in that book.

If any society which is older than 5 year and who has not completed it’s audit procedure for all of the years till date than what are the penal consequences. and is it possible to proceed for the audit year ended 31st march 2011 without doing audit of earlier years?

I Am Swapnil Kumar Ramesh Bhavsar has Passed the GDC&A Exam In May-2009 With 3 years Of experience after passing the exam & i want register my name on panel of GDC&A So,please send me the detail procedure to register the name on panel as early as possible before due date My Current Qulification is M.Com.GDC&A

I’ve gone through ur information /provission in MCS RULES 1961 Rule 69[2] where in u have mentioned [provided no auditor is appointed or AUDITOR HAS RESINGED ].
I verfied this in actual rule book where in” RESIGNATION of AUDITOR” text is not mentioned ,
Kindly let me know whether there is an amendment if so reference.
we require this because there is a dispute on “RESIGNAION ” issue. one viev is since ha is not a employeee resignation cannot be asked he can just express his INABILITY by submiting letter.
Give ur opinion with ref. pl !

i am pnnikhade passed GDC&A diploma in 2008 and send to info. my buldana district level society office and amravati office. i am a student for rural area . passed in Graduate computer science and PG- Statistics and PGDCA passed and GDC & A all cleared 08.M.Tech(App) student.
but 2011 this date no any update my name to audit office.

pl. send me any criteriya for this subject. pl. care my problem to all level.

hi sir iam pass gdc&a exam and also register and take the panal no.also but i don’t which type of job ido what the filed i choosed. sorry and sir /madam i do the job for CA but this company CA so what i do

Please let me know whether any latest notification/circular has been issued by the Office of the Central Registrar on the rate of Dividend payable to its shareholders/members by the Multi -State Co-op. Credit Society

my father had taken loan of 25000/- in the year of 2003. but he has not paid any premium.now cooperative society is saying that you have to pay 100000/-.
can we do one time settlement. what is the process? can it is allowed.

Dear Sir / Madam,
The information provided on the site is very useful and understandable.
Thanks for the aproach.
Who is qualify to be appointed as an internal auditor for co op housing socity. What is qualification required to be an internal auditor for co op hsg soc. Please revert back with a suitable gauidance.
Thanking You,
Yours sincerely
Atul sonawane
9623840409

TIME TABLE OF GDC&A EXAMINATION ARE AS UNDER
28/5/2011 10.00AM TO 1.00PM 1.THEORY & HISTORY OF COOPRATION
2.00PM TO 5.00PM 2.COOPRATIVE MANAGEMENT
29/5/2011 10.00AM TO 1.00PM 1.COOPRATIVE LAW & OTHER LAW
2.00PM TO 5.00PM 2.ACCOUNTS
30/5/2011 10.00AM TO 1.00PM 1.COOPRATIVE AUDIT
2.00PM TO 5.00PM 2.BANKING

TIME TABLE OF GDC&A EXAMINATION ARE AS UNDER
28/5/2011 10.00AM TO 1.00PM 1.THEORY & HISTORY OF COOPRATION
2.00PM TO 5.00PM 2.COOPRATIVE MANAGEMENT
29/5/2011 10.00AM TO 1.00PM 1.COOPRATIVE LAW & OTHER LAW
2.00PM TO 5.00PM 2.ACCOUNTS
30/5/2011 10.00AM TO 1.00PM 1.COOPRATIVE AUDIT
2.00PM TO 5.00PM 2.BANKING

last year i attened GDC&A I failed . so this year i want to attened so please send the where should i get the form and how much the fees. can we paid by online banking rather than going to RESERVE BANK? please informe me soon

sir,
i had passd G.D.C & A exam so pls give me information about which type i will registered to panel.
because i want to audit in co-operative society this year. so pls help me.
9271387337
HAPPY CHRISTMAS

Dear Sir/ Madam,
The information provided on the site is very useful and understandable.
Thanks for the aproach.

Who is qualify to be appointed as an internal auditor for co op housing socity and co operative credit society. What is qualification required to be an internal auditor for co op hsg and credit soc. Please revert back with a suitable gauidance.

what are the powers of Penal auditors appointed by registrar in Maharashtra,when society is not allowing the auditors to carry out the audit?

Kindly give the details for Registering in the Panel of Auditors maintained by Registrar.
What is the procedre for Panel Registration

I am Bhavna Patel Passed GDC&A EXAM IN 2010.please tell me about its next procedure.I want part time job forthis profession.

Dear Sir / Madam,
The information provided on the site is very useful and understandable.
Thanks for the aproach.
Who is qualify to be appointed as an internal auditor for co op housing socity. What is qualification required to be an internal auditor for co op hsg soc. Please revert back with a suitable gauidance.
Thanking You,
Yours sincerely
M Salim Salmani
Mob.9869900884

Dear All, i am completed my GDCA from pune university..i have been married and shifted to mumbai..can you please provide me the address were can i register myself under panel of GDCA please provide information it will be great help….Regards Gauri Suresh

What is position of investment of Statutory Reserve Fund in Multi State Credit Society. Whether it requires to be invested all the times or can be used as working capital while the balance in statutory reserve remaining the same

Since last 5 years (from 2003 to 2008) Our Housing society’s committee is not calling statutory auditors for auditing the accounts. Even writing frequently to the registrar, they ignot it. Please guide and suggest a way of auditing.

Sir, i want joind G.D.C & A. but i don’d know where and how i can jond this deploma. please tell me where submit application when submit.i am live in dombivali,thane. Please give me office address.thanks

Sir, i want joind G.D.C & A. but i don’d know where and how i can jond this deploma. please tell me where submit application when submit.i am live in thane / kalyan. Please give me office address.thanks,